UK government prepares to take over plant

The government is preparing to take control of the UK’s third largest steelworks in a bid to save the business and protect 1,500 jobs.

Managers have been lined up to take over Speciality Steels UK (SSUK) in South Yorkshire which is owned by Liberty Steel, a court heard.

The future of the company, which uses scrap metal to manufacture steel, has been uncertain for some time and it could be wound up over its large pile of unpaid debts.

It comes after ministers seized control of British Steel, in Scunthorpe, earlier this year to prevent the last plant in the UK producing virgin steel from closing.

SSUK is home to the UK’s only electric arc furnaces which are more energy efficient and are thought to be pivotal in the industry’s energy transition.

But the company has faced financial troubles for sometime and has been unable to buy the scrap metal needed to produce steel after Liberty Steel’s main lender collapsed and unpaid debts mounted.

A High Court judge is set to decide the fate of SSUK.

Lawyers for Sanjeev Gupta, executive chairman of GFG Alliance which owns Liberty, warned that a winding up order could mean the end of steel production at the plant.

They sought an adjournment to allow him to complete an administration process for the company to then be sold, without the need for any government intervention.

But lawyers for the creditors produced a letter to the court from the government offering reassurance that it would step in to take over the steelworks if required.

Creditors owed hundreds of millions of pounds petitioned a court to force the company into liquidation so that Liberty Steel’s assets can be sold to pay the debts owed.

Mr Gupta, whose firm owns a collection of businesses in energy, trading and steel, employing thousands of people in the UK, has faced scrutiny since GFG’s main lender Greensill Capital collapsed in 2021.

Sources close to the steel tycoon have confirmed reports that negotiations with investment giant Blackrock were ongoing to provide new funding to buy the business out of a managed or “pre-pack” administration.

The judge on Tuesday expressed reservations saying there was no certainty as to what would happen to the company after the compulsory liquidation the creditors were demanding.

“What happens to trading after the magic words are uttered?” he asked, referring to the formal granting of a winding up petition. “There is simply too much at stake.”

The case has been adjourned and referred to the High Court.

While the government is a supporter of steel, it is not a big fan of Mr Gupta and has rejected his repeated appeals for direct government support.

So the choice now is an unappealing one.

Allow Mr Gupta to try and keep control though an administration – at considerable cost to the lenders whose loans would be largely written off – but zero cost to the government.

Or help his creditors recover what is left of their money by taking on a loss-making steel plant for however long it takes for a buyer to be found and the sale proceeds dished out.

The government said it would “continue to closely monitor developments around Liberty Steel, including any public hearings, which are a matter for the company”.

“We are supporting the Official Receiver so that they are prepared to take the necessary steps should the company enter into compulsory liquidation,” a statement said.

Liberty Steel said it believed its “commercial solution backed by major private capital provides the best outcome for the business, its employees and all stakeholders concerned without cost to UK taxpayers or unnecessary uncertainty”.

A government intervention in Scunthorpe in 2019 cost the Treasury £600m during the 10 months it took to find Chinese buyer Jingye and since April, the government is back running day to day operations after it accused Jingye of planning to shut down its furnaces.

The government has said its looking for a commercial partner but that nationalisation of the plant is the most likely option.